Contract Negotiation: The Ambiguous Authority Tactic

In The Government Manager’s Guide to ContractNegotiation,authorLeGette McIntyre offers federal negotiators a host of tactics they can use to get a solid, fair deal for their agency. One of these tactics is the “ambiguous authority” tactic—which we’ve all been subjected to when we’ve bought a car! How do you employ the tactic to get the best deal for the government? Share some experiences with your colleagues and we’ll all be better prepared for the next negotiation!

THE AMBIGUOUS AUTHORITY TACTIC

You can use the ambiguous authority tactic when you are the chief negotiator but you don’t have ultimate authority to finalize the deal. You may have to go through an approval process before finalizing the negotiated agreement. You may have instructions to consult with a higher-up before you finalize the deal. These people or committees will be the ambiguous authorities you will defer to if you elect to use this tactic.

The most common use of this tactic is in buying a car. You’ve slogged it out with the salesperson all day and finally think you have a deal. But then the salesperson wrinkles her brow, frowns, shakes his or her head slowly, and says those magic words, “I’ll have to talk to my sales manager.” Usually, there is no sales manager. The salesperson simply leaves you in the room to stew and sweat a little bit. You start second-guessing your last offer—and negotiating against yourself.

It’s good practice never to go into a negotiation with unlimited authority to close the deal, even if everyone has given you preapproval to do so. Always have someone you must go back to for approval. If you do have ultimate authority, never let negotiators for the other side know it. Once they find out you are the sole decision-maker, they know you are the only obstacle in the way of the terms and conditions they want. There is just one person to convince.

The ambiguous authority tactic is usually employed just before the close of a negotiation. The other side thinks it has a deal, and all of a sudden there is someone else, or even a whole new cast of characters, to deal with. The last thing the other side wants is for this mysterious other person to blow a deal that is so close to being consummated. Negotiators may start to second-guess themselves and be tempted to soften their positions a bit to help you “sell” the deal to the other authority. They actually might start making additional concessions without demanding something in return. In effect, they start bidding against themselves.

Always try to keep your ambiguous authority as vague as possible. This prevents the other side from immediately countering your tactic. If you hold out your boss as your ambiguous authority, the other side may simply ask you to bring that person into the negotiation. It’s harder for them to put a face on something vague like “the review committee,” “my finance folks,” or “my customers.”

The best way to counter the ambiguous authority tactic is to head it off at the pass. Simply refuse to negotiate with anyone who doesn’t have ultimate authority to bind the company. Remember, you control the process—including setting and running the agenda. When you send the other side a copy of your draft agenda for review, simply ask who the negotiator will be and if that individual will have ultimate decision authority. Get it in writing.

If the other side shows up with a different negotiator, establish the extent of that person’s authority before the negotiation begins. If he or she doesn’t have the final say, call off the negotiation until the other side can provide someone who does. Even if the originally designated negotiator shows up, always reconfirm that individual’s authority before starting the negotiation. Always ask the question—and never negotiate with someone who can’t make the final call and sign the agreement.

If you miss that chance and are confronted with an ambiguous authority, counter with an ambiguous authority of your own. You now also must run the “draft” deal by your own higher-ups for approval. Suddenly the other side is confronted with the possibility of your side changing the deal. If the other side’s ambiguous authority is a tactic and it doesn’t know whether yours is or not, it will usually back off.

If you miss that chance and are confronted with an ambiguous authority, counter with an ambiguous authority of your own. You now also must run the “draft” deal by your own higher-ups for approval. Suddenly the other side is confronted with the possibility of your side changing the deal. If the other side’s ambiguous authority is a tactic and it doesn’t know whether yours is or not, it will usually back off.